Dec 152016
 

Check out our Beazer listing!

Buyers often have the impression that using a REALTOR when building a new home just drives up the price. But truth is builders typically figure in the REALTOR fees along with all the many other costs to determine their sale price / profit margin. So if you approach the builder directly they might give you a discount, but that would be one they already had figured into the sale price. And in the end you are at the mercy of the builder as you have no one representing you in what is typically a very complicated and expensive transaction. So I’ll explain what you need to consider when planning on building a home.

Let’s start with the most obvious. You usually need to sell your current home so you are going to hire a real estate agent and pay their fees to do so. It makes sense to then use that agent to represent you building your home as it costs you nothing. You have a relationship with them and you can trust that agent to continue to work hard for you, it’s how we build our business.

But let’s say you don’t have a house to sell, first time home buyer, new to area, etc. It’s even more important to have someone who knows the area and builders who are active in the area you are looking at. REALTORS have connections and you want to have that working for you during what is often a drawn-out process, depending on current new housing stock and your specific needs.

Now let’s look at some more general items that only your REALTOR is going to help you with.

You’ll want to establish your goals and what you are really looking for in your new home. Too often people get swept up with the first new home they look at and buy the trendiest options and end up spending more than they originally budgeted for. Your real estate agent can help guide you on your expectations based on your budget and help you stay ‘grounded’ on what options to consider. For example: You don’t want to build the largest home in the development, those are always more difficult to sell on down the line.

Once you’ve established your guidelines your REALTOR can help direct you to the appropriate developments in the area and your builder options. You may be leaning towards a particular development but not realize there are multiple builders working in that same area. Or you might find your best option isn’t even something you considered such as buying a lot outside a development and using a custom builder.

After you pick the area and builder your REALTOR can help you choose options that really add value based on that area and price range. For example: In a development where sheds or mini-barns are not allowed a 3-car garage is always going to make a home more marketable down the road.

Another item only your agent will be able to tell you about is area plans that would possibly affect the future growth in the area and how that would help with long term home values. This is important when you are determining the price range you are looking at. You don’t usually want to be the only high end development in an area as that can definitely effect long term home values for higher priced homes.

These are only some of the many reasons using a REALTOR to help you to build your dream home. If you even considering building don’t hesitate to call The Derrick Team to meet with you and discuss your plans, even if it’s a year or two away, it’s never too early to start planning. Call or text 317-563-1110 any time, we work 7 days a week. Let us help you build your dream home!

 

 

 

 

Jun 192016
 
1937 flooding in Indiana

Damaged Farmhouse – 1937

In 2004 FEMA started to finally update flood maps do to the discovery of several areas not properly covered during previous years flood events. This is  an ongoing process and in some cases homeowners are not aware their home has been designated a high flood risk area and may require flood insurance. The process is not very scientific and mistakes are made.

Any time you have a mortgage on property in a SFHA (Special Flood Hazard Area), the lender will usually require you have flood insurance, which can be pricey. The issue is that you may not even realized it until you go to sell your house. You get a buyer and all the sudden the buyer walks because he was told he needs flood insurance by his lender.

We just had this come up with one our listings and the seller found out from a neighbor who just sold their house that the whole street end overlooking a small creek was now in a SFHA. Of course they look down the hill at the creek, so flooding has never been and issue. But now they will have to address it due to disclosure laws.

You might want to do a quick check if you have any doubts on FEMA’s web site here.

Flooded area of downtown Indianapolis - March 1913 Photo: HistoricIndianapolis.com

Flooded area of downtown Indianapolis – March 1913 Photo: HistoricIndianapolis.com

Oh oh! Found out the bad news? Now you can try and get a Letter of Map Amendment (LOMA) that exempts your property. But guess what, you are going to have to pay for it. More details here on FEMA’s site. Not all homes will be able to get one so you’ll be stuck with the higher rates.

Best not wait till it’s time to sell your home. Just the insurance costs will deter some buyers, not the mention that they may think you’ve had flooding problems before. Sometimes the random power of the government will bite you when you least expect it.

The Federal Government has continued to extended the subsidy on flood insurance for a few more years but plans to slowly implement increases.  You might want to check this out while you still have time if your home is anywhere near a creek or major drainage ditch. And be sure and check any property before your purchase so you won’t have any surprises later.

Apr 022014
 
5 acres we sold just outside Danville

5 acres we sold just outside Danville

Part of the American Dream is to own that place out of the city with maybe a few acres, a pond or lake, and plenty of space for horses. This was something I wanted back when I was younger and hoped to have some day. It’s still a popular dream as any of our listings with a few acres gets a lot of inquiries. But it sounds really great until you actually try to purchase your Land Dream Home.

For this blog post we are focusing on raw land, as that is what we receive so many questions on what a person needs to do to make an offer. Usually the conversation starts with “We want to make an offer, what do we need to do?” The caller is excited and doesn’t want to lose out on the opportunity to buy the first part of their Land Dream Home. But then it gets a little more complicated.

As in all purchases the ‘how you pay for it’ comes into play here. Unlike what is referred to as ‘developed land’, meaning land with a home built on it; it can be difficult to get a lender to finance ‘undeveloped land’ or raw land. Land with a home on it is much easier to place a monetary value on thus the appraisal can give a clear value on how much money can be loaned to the buyer. Raw land on the other hand often has potential value based on its possible use. Agricultural land can be used as collateral for a farm loan but the value is based on possible future crop production. Commercial land can also be valued based on future income possibilities. But with residential the value can vary greatly based on what it’s used for and what is eventually built on it. So lenders tend to stay away from loans for raw land.

The only exception is the situation where the buyer is ready to build a home. This is a type of bridge loan where the lender approves a loan based on the land value and the home to be built on it. These typically are limited to 18 to 24 months while the home is constructed. The loan is then converted to a standard mortgage once the home is completed. So the best way to approach this option is to pick out the builder and type of home you want to build and find the land to build on. If you won’t be ready to build for a few years this probably will not work for you.

Another option is to buy on contract. In this case the seller has to be willing to be the lender for a set period of time, usually limited to a few years. The buyer agrees per a ‘land contract’ to put a certain percentage down, usually 20-25% and make monthly payments like a normal loan. Typically these are limited to 2 – 4 years and at the end of the term the buyer must pay the remaining balance or forfeit the land back to the seller. Interest rates are usually higher than general rates at the time. So as you can see this type of loan strongly favors the seller for taking all the risk as they may end up having to put the land back on the market. This is not necessarily the best approach to start with your Land Dream Home.

So how does one actually buy raw land? One word: Cash. In any purchase cash is king but in this case it really is the only viable option. So we recommend that if you want to buy raw land to start the process for your Land Dream Home, start saving now to purchase in a few years. There may be other options for you to get cash such as borrowing against retirement accounts but that would be a discussion with your financial planner, not something we Realtors can advise you on. Then there are always rich relatives but again that’s outside of our advice window.

So to summarize you have 2 viable options. If you are ready to build hire a builder and work with a lender on a construction loan. Or pay with cash.

If you have any further questions or need help in locating the perfect land for your Land Dream Home give The Derrick Team a call today at 317-563-1110. Even if you are a few years out from having enough cash, feel free to contact us. We’ll help you down that long road to your Land Dream Home. You can find some land search links at our web site http://IndianaAcres.com.

15 Acres we sold in Brown County

15 Acres we sold in Brown County

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